NAT'L INST. OF STAND & TECH R .FERE

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NBSIR 74-471

Life Cycle Costing of Police Patrol Cars:

Summary Report

Rosalie T. Ruegg

Technical Analysis Division

Institute for Applied Technology

National Bureau of Standards

U. S. Department of Commerce

March, 1974

U. S. DEPARTMENT OF COMMERCE c00

56

NATIONAL BUREAU OF STANDARDS

74-471

974

NBSIR 74-471

LIFE CYCLE COSTING OF POLICE PATROL CARS:

SUMMARY REPORT

Rosalie T. Ruegg

Technical Analysis Division

Institute for Applied Technology

National Bureau of Standards

U. S. Department of Commerce

March, 1974

U. S. DEPARTMENT OF COMMERCE, Frederick B. Dent. Secretary

NATIONAL BUREAU OF STANDARDS, Richard W. Roberts, Director

PREFACE

In July 1972 the National Institute of Law Enforcement and Criminal Justice, the

research arm of the Law Enforcement Assistance Administration, approved and funded a project submitted by the Law Enforcement Standards Laboratory, National Bureau of

Standards (NBS) , to conduct a life-cycle cost analysis of police patrol car acquisition,

maintenance and disposal practices. The Law Enforcement Standards Laboratory contracted

with the NBS Technical Analysis Division to conduct this study and to prepare a report

of its findings for distribution to State and local law enforcement agencies. The full

report entitled "Life Cycle Costing of Police Patrol Cars: Efficiency in Vehicle

Acquisition, Operation and Disposition", is forthcoming as a publication of the

National Institute of Law Enforcement and Criminal Justice.

This summary report is intended as a convenient means of acquainting fleet managers

with the research effort, as a basis for discussion of the work prior to the publication

of the full report, and as an easy reference to the findings. The full report contains

a large amount of descriptive information on fleet practices, life cycle costing

methodology, many statistical and informational exhibits and charts, and tables of

empirical data which are not included in this summary report.

The fact that the National Institute of Law Enforcement and Criminal Justice

furnished financial support to the activity resulting in this publication does not

necessarily indicate the concurrence of the Institute in the statements of conclusions

contained herein.
ACKNOWLEDGMENT

The Technical Analysis Division extends appreciation to each of those persons and

organizations who assisted in providing information to the study. Special assistance

was provided by many persons in the following State and local governmental agencies:

Arizona Department of Public Safety; Los Angeles Police Department; Arlington County

Virginia Equipment Division; Prince Georges County Maryland Police Department; City of

Jacksonville Florida, Motor Pool Division; City of Pasadena California; St. Paul

Minnesota Police Department; Washington, D. C. Police Department; City of Philadelphia;

Bay City Michigan Police Department; Virginia State Police; Maryland State Police;

California State Highway Patrol; Mt. Ranier Maryland Police Department; City of Seattle;

Alabama Highway Patrol; Honolulu Hawaii Police Department; South Carolina State Highway

Department; State of New York; Illinois State Police; and by the following commercial

enterprises: Mainstem, Inc., Princeton, N. J.; Peterson, Howell, ana Heather, Baltimore,

Maryland; Municipal Leasing Systems, Inc., Bethlehem, Pa.; Indiana Auto Auction, Inc.;

Midwest Auto Sales, Inc., Dayton, Ohio; Pan-American Auto Wholesaler, Brooklyn, N. Y .

;

Hill and Sanders Ford, Wheaton, Md. ; Rosenthal Chevrolet, Arlington, Va. ; Leaseplans

Development Corp.; and Arrow Leasing Co.

Thanks are due to members of the Technical Analysis Division, especially to Ms.

Linda Cummings, Mr. Don Corrigan, and particularly Ms. Margery King for help in gathering

information for the study; to Messrs. William Murphey and William O'Neal for assistance

in data handling; and to Dr. Vartkes Broussalian and Mr. Walter Leight who reviewed the

draft report and offered valuable comments. Grateful acknowledgement is also made to

Mr. Jared Collard, Acting Manager of the Police Vehicle Program, Law Enforcement

Standards Laboratory, who provided assistance throughout the study.
TABLE OF CONTENTS

Pag e Preface i Acknowledgment ii

1.0 Introduction 1

2.0 Life Cycle Costing and Police Fleet Management 1

3.0 Cost Saving Practices in Buying and Selling 2

4 . 0 Vehicle Leasing and Contracting Maintenance

Compared with Ownership and Self-Maintenance 5

5.0 Operating and Maintenance Costs 7

6.0 Cost Analysis of the Personal Car Program 10

7.0 Replacement of Patrol Cars 12

8.0 Summary 16

iii

1.0 INTRODUCTION

There are many different choices to be made with respect to police vehicle

acquisition, utilization, maintenance, and disposition. Cost comparison among the

different alternatives are an important element in the choices to be made. To make

valid cost comparisons, it is necessary to employ the techniques of life cycle costing.

This means the inclusion of all relevant costs and the conversion of costs to an equivalent basis to take into account differences in the timing of expenditures.

This report briefly summarizes the results of a larger study which investigates

the life cycle costs of some of the alternatives associated with police fleet management. 1 Specific decision questions addressed by the larger study and summarized here are the

following

:

(1) What are the cost effects of purchasing different sizes of patrol cars and

different optional equipment?

(2) What are the advantages and disadvantages of direct ownership of vehicles as compared with leasing vehicles?

(3) How do the costs of contracting out maintenance compare with costs of an inhouse shop?

(4) What are the effects of alternative utilization practices on fleet costs?

(5) How often should vehicles be replaced?

(6) What method of vehicle disposition is most efficient?

The focus of the study is on police patrol cars, by far the predominant kind of

vehicle in most fleets. The methods and techniques are, however, applicable to other

types of vehicles.

Information for the study was obtained through interviews and correspondence with

State, city, and county police fleet supervisors; interviews and correspondence with

management of commercial fleet enterprises, automobile manufacturers, dealers, leasing

businesses, and auto auction specialists; review and analysis of internal records,

manuals, reports, data banks and surveys of police departments and other organizations;

review of published literature, and attendance at meetings dealing with fleet management.

Each topic is presented approximately in the order taken in the full report.

Although some cost data are included here, the extensive statistical tables and details

of the cost analyses contained in the full report are not included. Also not summarized

here is the extensive overview of existing fleet practices which is provided in an appendix to the full report. Current practices that are described in the full report

are fleet composition, patrol car selection and accessorization , car acquisition, fleet

size, car utilization practices, maintenance, and replacement policy.

2.0 LIFE CYCLE COSTING AND POLICE FLEET MANAGEMENT

The full report contains a chapter on life cycle costing methodology for the purpose

of providing an understanding of the techniques used to compare costs of alternative

systems. A life cycle costing (LCC) approach to fleet management examines efficiency

over the life of the police transportation system, rather than focusing on only one

area of cost, such as initial expenditure for one point in time. The study discusses

the following procedures which are essential to performing life cycle costing:

(1) Specification of the desired objective or goal; e.g., the objective might be

to secure police warning light systems with certain performance characteristics.

(2) Identification of the alternative means or systems by which the objective may

be accomplished; e.g., to lease model A lights on a five year full-maintenance

lease or to buy model A or model B lights.

'As explained in the Preface, this report is a summary of a more extensive report

entitled Life Cycle Costing: Efficiency in Vehicle Acquisition, Operation and

Disposition .

1
(3) Calculation of all relevant cash flows, and their expected timing, associated

with each alternative.

(4) Conversion of the cash flow for each alternative to an equivalent base by means of a discount factor, to reflect the opportunity cost of money.

(5) Summation of discounted costs for each alternative.

(6) Comparison of life cycle costs of alternatives, and selection of the

alternative with the least life cycle costs.

Because costs of alternative systems may differ both in amount and in time of

occurrence, a comparison of discounted costs over the lives of systems may differ

markedly from the comparison of the undiscounted sums of present and future expenditures.

For example, a comparison of the cost of two warning light systems -- an aluminum

bar with 2 rotating lights at each end and a roof-mounted light with four rotating bulbs -- comparable in their level of conspicuity, showed the following. Although the bar light

had a higher purchase price, the model costed was less expensive than the bubble light over the lives of the systems. Including the repetitive expenses of removal and re- installation of the systems over their expected lives and taking into account the

differences in timing of expenditures resulted in a more valid comparison of costs.

The analyses of police fleet problems performed by the study shows that LCC techniques

can be profitably applied to many different kinds of problems which regularly confront

the fleet manager. By providing a more complete understanding of the cost effects of

alternative decisions LCC can improve efficiency.

Contacts with a number of police departments, however, showed that many do not keep

cost records adequate for good management control. In order to assess the effects of

alternative fleet decisions, up-to-date cost information is necessary. In developing

a good cost accounting system, departments may find helpful the guides, programs, and

cost control systems for fleet management which are currently offered by both commercial

and public organizations.

In addition to the problem of inadequate cost records, many departments appear

to have the problem of faulty accounting systems which cause disincentives to efficient

management. Failure to charge or credit appropriate cost centers may cause managers

to neglect certain costs in their decisions. For example, it may be more profitable

for departments which receive no direct credit from their used vehicles to cannibalize

them for parts retrieval, rather than to sell them at the optimal time or transfer them

for use by other departments of government, even if the latter means of disposition are more cost effective for the local government at large. A proper charge-back system can provide efficiency incentives.

3.0 COST SAVING PRACTICES IN BUYING AND SELLING

The study investigates managerial practices for reducing vehicle depreciation costs.

Specific practices which are considered include procurement; model selection; length

of ownership; selection of accessories, color, and equipment; reconditioning; timing

of resale; and method of car disposal.

Procurement

A brief examination of specification preparation and bid acceptance by police

departments leads to the following conclusions:

(1) Although it is not always economical to accept the lowest bid, many departments

continue the practice, believing that they have no alternative or that

justification for departing from low bid is too difficult. It was found,

however, that procurement regulations are often written to allow exceptions

to low bid acceptance. Justification of refusing low bid on the basis of

projected higher eventual costs in depreciation, operation and maintenance

is usually difficult. Departments appear more successful in rejecting

low bid on basis of *higher cost of parts, cost of changing inventory, cost

of additional maintenance equipment, and cost of retraining mechanics, cost

differences which are easier to document than the former.

2
(2) Cost may be reduced by avoiding unusual and unnecessary features in the

specifications, by taking advantage of research and test results and

illustrative specifications available from other departments, and possibly,

by joining in group buying efforts. Although most of the major car manufacturers no longer offer quantity discounts to fleets, cost reductions

in the form of special service delivery priority, or reductions in the dealer's

profit margin may be attained by submission of specifications jointly with

other departments. Care should be taken, however, to avoid a pitfall common

to group buying: the acceptance of an unsuitable vehicle.

Model Selection, Length of Ownership, Accessorizing and Color

Based on representative purchase prices, resale values, and associated patrol car depreciation, the following conclusions are reached regarding practices for reducing

depreciation

:

(1) Depreciation cost on patrol cars can usually be reduced by choosing less

expensive, smaller cars (provided they can be effectively used). As shown

in Table 1, typical savings by a medium city department, expressed in terms

of uniform annual cost, is about $140 by moving from the standard, top-of-theline model to the standard, middle-of -the-line model, and about $160 more by

moving from the middle to the standard, bottom-of -the-line model. A total

savings of $300 in uniform annual cost is therefore possible by moving from

the standard, top-of-the-line to the standard, bottom-of -the-line model. The

potential savings by moving from standards to intermediates is even larger:

a standard, middle-of-the-line car operated for one to two years by a medium

size city department was found typically to cost between $500 and $600 more annually in depreciation than intermediate, middle-of-the-line models.

(2) The heavier the utilization (or the poorer the condition of the cars at time

of replacement) , the greater the savings in depreciation by buying bottom-ofthe-line cars. The cost impact of harder utilization and poorer car condition

is indicated in the table by the relatively higher depreciation typical of

city-owned patrol cars as compared with that typical of State patrol cars

of similar model.

(3) Extending the period of ownership reduces average annual depreciation. For

example, for a standard, middle-of-the-line patrol car operated by a State

highway patrol department , extending the ownership period from one to two

years typically decreases annual depreciation by nearly $400, and increasing

the period from two to three years, decreases annual depreciation by another

$300. (The relationship between depreciation and running costs over time is

covered in Section 7.0.)

(4) Purchase of expensive, luxury-model patrol cars generally cannot be justified

in terms of costs alone, although they may be justifiable for other reasons,

such as performance, officer morale, or appearance. If a luxury model is

selected, suitable accessories, good condition, and early replacement are necessary to preserve the car's resale value, but extensive accessorizing

and early replacement to preserve resale value nevertheless is not generally

cost effective.

(5) Empirical data suggest that depreciation cost may be reduced by selection of

"non-patrol-car" colors and color diversification within the fleet. In other

words, uniform black and white vehicles have a lower resale or trade-in value

than the more popular colors.

(6) Considering cost only, luxury accessories on patrol cars are seldom worthwhile,

particularly in the case of bottom-of-the-line cars or those sold after

several years' usage with high mileage and/or in poor condition.

(7) If middle or top-of-the-line cars are purchased and early resale is planned,

inclusion of luxury accessories and elimination of the austere police car appearance will usually be desirable from the standpoint of cost.

Reconditioning, Timing of Resale, and Method of Disposition

An examination of practices surrounding patrol car disposal results in the following

conclusions

:

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(1) Selective reconditioning appears to be efficient, with an average expenditure

of approximately 10 percent of the estimated value of the car. This percentage

may be increased somewhat for cars with greater potential consumer appeal.

(2) Normally it is most efficient to purchase and dispose of cars early in the

model year. However, depreciation costs tend to level off between late

spring and late summer, rising sharply again thereafter. In consequence,

purchase and disposal delayed until spring can be further deferred without

significant penalty.

(3) If enough cars in relatively good condition are available for frequent sales,

retail methods of disposal -- such as a police auction — if administratively

feasible, will likely be cost effective.

(4) If cars are in poor condition, or if no good local market exists, wholesale

disposal (such as consignment to an auto auctio- or sale to used car dealers

or wholesalers) is relatively quick and avoids costly storage and built-in

depreciation

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(5) Given an equitable cost accountability system, the transfer or sale of cars to

other departments may be beneficial to police departments (as well as the

local government) by reducing annual depreciation cost.

(6) Although net trade-in prices are usually low, trade-in may appeal to departments

without attractive alternatives, possibly providing advantages of preferential

service, convenient and timely disposal, and low disposal cost. Care must

be taken to determine the true net cost of the new car/trade-in bid, since

high quoted trade-in prices often mask high new car prices.

4.0 VEHICLE LEASING AND CONTRACT MAINTENANCE COMPARED

WITH OWNERSHIP AND SELF-MAINTENANCE

In connection with vehicle acquisition, the study looks both at ownership and leasing.

The types of leases are described and the relative merits of the different types of

leases are discussed from the standpoint of police fleets. There are three basic types

of leases: (1) The finance lease provides vehicles but makes no provision for maintenance

and operating services. The lessee controls and pays for all maintenance and operating

costs and reimburses the lessor for any resale loss (or receives any resale gain) when

the vehicle is turned back to the lessor for disposition. (2) The net lease, like

the finance lease, makes no provision for maintenance or operating expenses, but unlike it,

is closed-end, with no financial adjustment for variation in actual depreciation.

(3) The maintenance lease includes provision for some maintenance by the lessor, the

amount ranging from very limited to comprehensive.

It was found that while the finance lease is the most prevalent form of lease used

by private fleets, the maintenance lease is favored by many police departments. Chief

reasons for preference for the maintenance lease were that: (1) it offers small and

moderate size departments a possible reduction in service costs due to economies of scale

achieved by the lessor, and (2) it offers departments of all sizes a possible escape from

existing poor maintenance arrangements.

The claim is often made that leasing is not a viable alternative for police fleets.

However, the experience of police departments with leasing suggests that such claims

are not valid. Examples of actual lease arrangements were found whereby departments

avoid or reduce potential problems and achieve considerable control, flexibility, and

dependability with leased fleets. No impediments to police fleet leasing were discovered

which by nature appear insurmountable.

After lease arrangements and police experience with leasing are considered, the

costs of leasing and buying are compared. Two basic questions are addressed: (1) Is

it economical to secure use of patrol cars through a lease? (2) Is it economical to secure maintenance through a lease or other contract arrangement with outside parties?

The cost comparisons lead to the following general conclusions:

(1) There appears to be no general cost advantage to police departments from

leasing vehicles for full-time use on a finance lease, i.e., of securing

only the use of the car without provision of service. A cost comparison,

shown in Table 2, of finance leasing with buying a car suitable for patrol

work indicates a substantially larger cash outlay for leasing than for buying.

But, the more relevant comparison of discounted cash flow shows the estimated

present value of leasing to be only $164 more than purchase. Special motives,

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such as the implementation of a more re or the freeing of funds for alternative

of return may nevertheless influence s of vehicle acquisition through leasing.

gular and frequent replacement policy

purposes having a higher expected rate

orae departments to consider financing

(2) There is a critical level of utilization, i.e., rate of use per time period,

below which short-term rental of a vehicle becomes cheaper than purchase.

This critical level of utilization may be approximated by computing the ratio

of the annual cost of vehicle ownership to the annual cost of full-time renting.

For example, if ownership costs are estimated at $3,000 per year and the

rental cost (at short-term rates) for one year at $4,000, then it is cheaper

to buy the vehicle if it is to be used more than 75 percent of the time,

otherwise, rental is cheaper.

The report compares costs of providing maintenance through an in-house garage with

costs of contracting maintenance. Exhibit 1 charts the estimated costs of the maintenance

alternatives and shows the breakeven point -- that fleet size/mileage at which the

alternatives are equal in cost. Based on the estimated cost data, and assuming a police

shop wage rate of $8.00 per hour and outside charge of $12.00 per hour, the breakeven

point comes at approximately 95 vehicles/3,325,000 miles, at a cost of about $200,000.

With smaller fleets/lower mileage, contract-maintenance appears to be cheaper; with

larger fleets, self-maintenance appears cheaper.

To test the sensitivity of the analysis to the specific cost assumptions, the

breakeven point is recomputed for alternative wage rate differentials and equipment

and building expenditures. For a police labor rate of $5.00 per hour and a private

garage rate of $15.00 per hour, the estimated equivalent annual cost of ownership

for 95 vehicles becomes approximately $168,000, while the estimated annual contract

cost is slightly more than $250,000 for 95 vehicles. Only at fleet sizes as small

as 10 to 15 vehicles is contracting-out more economical than self-maintenance. Of

course, a relative change in labor rates in the opposite direction can be expected to

have an opposite effect, pointing up the need to make comparisons based on actual

inputs encountered in a given situation.

The analysis indicates the following:

(1) Even if wage rates in police shops are substantially below labor rates for

commercial garages (say, $5.00 per hour compared with $15.00 per.hour),

contracting maintenance appears the more efficient policy for fleets of

fifteen cars or less.

(2) If there is little wage differential between police shops and commercial

garages, contracting maintenance appears cheaper than self-maintenance even

for fleets as large as 100 cars.

(3) Even for very large fleets, contract maintenance may offer an efficient shortterm solution to existing arrangements which provide poor service.

(4) Due to possible reductions in in-house administrative cost, a full-maintenance

lease (offering both finance and service) may be an efficient means of

contracting out maintenace , even though the finance aspect of the lease

by itself offers no particular advantage.

5.0 OPERATING AND MAINTENANCE COSTS

The study discusses operating and maintenance costs for patrol cars, presents

empirical data for cars of different sizes and for cars used at different rates and

driven in different environments, and discusses means of cost reduction.

Based on a sample of more than one thousand patrol cars operating in twenty-nine

cities, the study concludes that selecting smaller cars for patrol work offers savings

in fuel costs, but may not offer the savings in maintenance costs usually obtained

by use of smaller cars for other purposes. In fact, as shown in Table 3, the sample

data showed a small rise in maintenance cost as car size decreased. Nevertheless,

overall running cost of smaller-than-standard cars in the sample were less than

running cost of standard and larger cars. The findings suggest that standard and

larger cars may not cost significantly more to run for patrol purposes than smaller

cars, but additional study is needed to validate these comparisons. 1 However, even

Note that the empirical data used in the analysis predate the substantial rise in

gasoline prices, which would likely increase the relative cost advantage of the

smaller car.
Exhibit 1

In-House Vs. Cont ract i ng-'Out Maintenance: The Breakeven ^oint

(Based on a Police Shop Wage Rate of $8.00 per hour

and an Outside Charge of $12.00 per hour).

No. of Vehirlpi;

350,000 1,750,000 eT,500,000 5,250,000

No. of Vehicle Miles

8
3

8

S

o

1"

8

CM CM

CM00 CM

rH <T\ CM

S3

ON

r0

N

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cm 'S V

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9
with little difference in running costs, the savings in depreciation costs of a smallerthan-standard car make it the efficient choice, given that it can be used effectively.

Sample data show that congested traffic conditions lower gasoline mileage significantly, and raise maintenance cost by about $.02 per mile. On this basis, we might

estimate the potential savings from decreasing the frequency of stops and starts and

reducing the idling of the motor as approaching $.02 per mile.

Life-time operating and maintenance costs for a sample of State highway patrol

cars show gasoline and oil costs accountive for a little more than half of the total

$3,660 per car in average running costs, and maintenance cost a little less than half

the total. Data for a sample of city patrol cars show that maintenance costs exceed

gasoline and oil costs.

Table 4 which gives a breakdown of the type and cost of maintenance and the mileage

interval of occurrence for sample city patrol cars shows an increase in maintenance

cost per mile as mileage accumulates, rising from an average of 2.56C per mile for new

cars in the sample to 4.60C per mile for cars with more than 60,000 miles. The data

indicate the expenditures incurred for the various mechanical components, and at what

mileage particular kinds of problems arise. For example, during the first 10,000 miles

of operation, repairs to the ignition and lighting systems are the largest single cost

for mechanical components and by 20,000 miles, brakes begin to account for an important

share of cost; at 50,000 miles transmission work becomes large, and at 60,000 miles

the power train system is expensive to maintain.

Practices reported by police departments for reducing fuel cost included specification of octane requirements among vehicle types, and elimination of the need for and

availability of higher octane gasoline whenever possible.

The study also discusses the organization and location of maintenance facilities,

i.e., centralized vs. decentralized facilities, police shop, municipal garage, or private vendor, and presents cost data for samples of departments with different types

of facilities, adjusted for differences in average wage rates. On the basis of

sample data and a priori reasoning, it was concluded that, other things equal, the

possibility of economies of scale and transportation costs to and from the facility,

support the municipal garage for small, centrally located fleets, and either a system

of decentralized municipal shops or contractual arrangements with scattered private

vendors for small dispersed fleets. For larger fleets, the organizational structure

of the maintenance facility -- police, municipal, or privately operated — is probably

less important from the standpoint of costs per se .

6.0 COST ANALYSIS OF THE PERSONAL CAR PROGRAM

The report describes the nature and possible benefits of a personal car program

whereby each officer is assigned a car to be used for his personal, off-duty use, as well as for his regular duty. Empirical cost data from existing personal car programs

are presented and discussed. Capitalization and running expenses of a personal car program are compared to costs of a minimum fleet/multi-shift plan, in which cars are assigned to a vehicle pool.

The primary benefits claimed for the program are reductions in crime and in

accidents, increased criminal apprehension, and greater citizen security. Other

attributed advantages, such as higher officer moral and safety and improved public image

of the police, pertain more to internal department operations. Cost reduction is also

sometimes cited as an advantage of the program.

Empirical information provided strong evidence, but not conclusive proof, that

running costs of personal cars are less than for multi-shift pool cars, but there is

also some evidence to the contrary. Better care of the personal cars, stemming from

increased officer accountability, responsibility, and pride in the cars, provides some rationale for the lower running costs of personal cars.

10
TABLE 4

Maintenance Cost (in cents per mile) for a Sample of City Patrol Cars

by Type of Expenditure and Mileage Interval of Occurrence3

Mileage Intervals

0 10,000 20,000 30,000 40 ,000 50 ,000 60,000

to to to to to to to TunP of ^f»^\7^pp> J r O C l v A I. C 101 J • 000 \J\J\J 20 000 10 000 40 000 50 000 60 000 999 000

h h V

A

V

Jm

<r

| ngf rir» nop 0. 01 0. 01 o'J • mUl U Ul nU.Ulm nu . mux au . mUl Axle nWiXCy F1 > NDill-/ 0. 01 0. 01 \J • ox nu . n—u u . ux U.Ul n at a no Axle R ND 0.0- 0.0- 0.0- o n— u . u

A A— u • u— Brakes — Maj

•

0.07 0. 13 0.29 0.27 0. 27 0 . 29 0 . 31 Brakes - Min. 0.02 0.04 0.06 0.03 0.05 0.06 0.04 Frame 0.01 0.01 0.01 0.01 0.01 0.02 0.04

Steering 0.05 0.05 0.07 0.09 0.12 0.10 0.19

Suspens ion 0.07 0.08 0.13 0.12 0.15 0.15 0.16

Wh., Rim, H, B 0.02 0.02 0.03 0.03 0.04 0.04 0.03

Axle Dr. , F 0.0- 0.0- 0.0-

Axle Dr. , R 0.01 0.01 0.02 0.01 0.01 0.01 0.05 Clutch - Maj

.

0.01 0.0- 0.0-

Clutch - Min. 0.0- 0.0- 0.0- 0.0-

Dr. Shafts

I'.T.O. 0.0- 0.0- 0.01

0.0-

0.01 0.01 0.02 0.04

Trans. Maj. 0.06 0.06 0.10 0.13 0.13

0.0-

0.31 0.34

Trans. Min. 0.02 0.04 0.03 0.07 0.06 0.05 0.08

Trans. Aux. 0.0- 0.0- 0.0- 0.0- 0.0- 0.0-

Charge Sys. 0.07 0.11 0.17 0 . 16 0 1 fi nU • Z?iJ. Crnk. & Bat. 0.08 0. 10 u • ±H o 17 U.io n i q A 10 u . xy A 71 U . zl Ignition 0.12 0. 20 0.23 nU JU"?n n 0.0 nU • JUon Lighting 0.14 0.09 0.11 0. 13 0.12 0.11 0 17 Air Intake 0.0- 0.0- aU . mUl U. 01 0. 01 0.01 0.01

Cool ing 0.05 0.05 o OQ nU.iJi ^ 0 14 0U . 117/ Exhaust 0.06 0.05 AU . Ub U.Uo A AO A 1 A

U. 10 0.09

Fuel 0.03 0.05 0 . 06 0 . 09 n 1

1

nin u • ±u nil U . 11 Power - Maj

.

0.03 0.06 o 77 n 00 A OO A O tr U . ZD A A 1 U . 41 Power - Min. 0.08 0.13 0.18 0.18 0.16 0.22 0.15 SUB-TOTAL 1.01 1.29 1 99 2* 20fay 2.41 ? 71 J1 . 07u / Lub. 0.04 0.03 0.03 0.03 0 . 04 0.04 0.01

PM 0.41 0.37 0.34 0.29 0. 32 0. 32 0. 35 Access & Expen. 0.21 0.10 0.11 0.11 0.12 0.13 0.15

Power Tailgate 0.0- 0.0-

Radio Equip. 0.04 0.02 0.01 0.02 0.01 0.03 0.04 Winch & VC Sys.

AC/Heat /Vent 0. 05 0.07 0.08 0.11 0.14 0.15 0.11 Cab/Sheet Metal 0.05 0.08 0.05 0.04 0.05 0.05 0.05

Tires 0.41 0.44 0.51 0.58 0.59 0.55 0.50

Body & Door 0.15 0.18 0.19 0.16 0.30 0.18 0.16

Clean & Paint 0.07 0.07 0.05 0.01 0.01 0.02 0.03

Towing & Other 0.10 0.09 0.08 0.09 0.09 0.11 0.12

Mounted System 0.01 0.01 0.01 0.01 0.01 0.01 0.02 TOTAL 2.56 2.73 3.45 3.66 4.08 4.30 4.60

Cost data are averages for more than 1100 patrol cars operated in twenty-nine cities. There are

some problems with the data collection procedure used to generate the new data from which <;PM figures were computed, that may cause some distortions in the data. The main problem is that

maintenance and mileage data are reported for the life of the vehicle in the system, not the current odometer reading. While the magnitude of the problem is probably not great, it may tend

to raise the cost of maintenance over the lower mileage intervals.

Source: Computed from data supplied by Mainstem, Inc.

NOTE: Expression of cost items in terms of ePM is not meant to imply that cost is in all cases

a function of mileage; rather it is used as means to translate costs expressed originally for different numbers of vehicles and mileages to a common denominator for comparison. An effort

has been made to separate those cost elements which are more fixed in nature from the variable

cost elements, so as to avoid distortion of the cPM comparisons which result from spreading fixed

cost over different mileages. Therefore, a subtotal is computed for a like group of items for

which costs are more clearly variable in nature.

11
Costs of a personal car program are compared with costs of a multi-shift plan for

a hypothetical department with 200 officers and the cash flow patterns shown in Table

5. Table 6, which shows the uniform annual costs of the two plans computed for

alternative per mile running costs, off-duty mileage, and depreciation rates, allows

us to assess the cost differences between the plans. It appears that (1) the costs

of the two plans are about equal if personal cars are used off-duty sparingly, are replaced every three years (as compared with annual replacement for pool cars)

,

maintain their annual resale value about as well as private cars, and incur running cost

less than half as much as the pool cars; (2) the personal car program costs much more

than a multi-shift plan — about double in the case examined -- if personal cars are used extensively off-duty, are consequently replaced every two years instead of three,

and if they incur about the same per mile operating cost as multi-shift cars; and

(3) in all cases a very large reduction in running costs is required to equalize costs

of the programs. Given empirical evidence that casts doubt on the likelihood of

achieving a large reduction in running costs for personal cars, it is concluded that

most personal car programs will probably cost substantially more than multi-shift plans.

The program therefore will usually not be justifiable in terms of fleet cost alone.

However, the value of benefits from the personal car program may exceed associated

costs; hence the program may be justifiable in terms of increased net benefits.

7 . 0 REPLACEMENT OF PATROL CARS

The investigation of replacement decisions revealed at the outset that, due to

substantial variation in costs among vehicles and departments, it is not advisable

to think in terms of a uniform economic replacement time for patrol cars. A sounder

approach is for individual departments to determine their optimal replacement policy

in light of their particular cost experience.

The intention of the study, therefore, is not to define the economic life of

patrol cars in general, but rather to describe and to illustrate with police fleet

data the techniques for determining optimal replacement. It is, however, possible to

express certain of the observed relationships between fleet characteristics and economic

life in terms of general guidelines for development of policy within individual

departments

.

The concept of economic life and development of replacement models is based on

the fact that incremental running cost tends to increase with mileage and age, and

incremental depreciation cost tends to decline with age of the vehicle, such that

there is a point at which combined running expense and depreciation are a minimum

per unit of time/mileage. These cost relationships are illustrated in Exhibit 2. Techniques for identifying the replacement time which minimizes the annual cost or present value of long-run fleet costs were found suitable for application to police

f leets

.

For practicality and efficiency, departments generally need a dual approach to

replacement decisions. For the purpose of budgeting and for control, it is useful to

predict the average economic lives of the various types of vehicles, based on past

costs and resale values. Predicting average life will indicate the approximate number

of replacements which will be required over the coming period. A second decision

approach is needed for replacing individual vehicles, which may differ substantially

in their costs, within the group. Where review on an individual vehicle basis is

infeasible, the former approach will allow the manager to set a more informed general

replacement rule.

The use of police cost data in a replacement model produces a variety of

replacement schedules, ranging from replacement in the first year to no replacement

until necessitated by safety, performance and other factors. Results are quite

sensitive to the rate of car utilization, the rate of depreciation, and the pattern

of maintenance costs. The following generalizations are made on the basis of case

examples: »

(1) The faster the rate of depreciation, the greater the advantage of retaining

vehicles longer.

(2) The lower the rate of utilization, the greater the advantage of retaining

vehicles longer.

(3) Maintenance and repair costs must increase fairly sharply with age and

mileage for declining depreciation per unit time to be offset.

12
Table 5 Amount and Timing of Expenditures and Receipts

for a Personal Car Program and a Multi-Shift Plan3

PCP MSP

No. Cars Purchased'3 200 every 3 yrs. 55 each yr. Purchase Outlay0 for $600,000 every $165,000 each yr. New Cars 3 yrs.

Receipts from Saled $228,000 every $82,500 each yr.

of Used Cars 3 yrs.

Purchase Outlaye for $240,000 every $66,000 every

Car Equipment 10 yrs. 10 yrs.

Insurance Premiums $20,000 each yr. $5,500 each yr

.

Running Cost f 4,100,000 (X) $264,000 each yr

.

a0nly ownership and operating costs are considered here,

but in fact, there might be other costs associated with

alternative fleet plans, such as cost of parts inventory and

garage facilities which would also differ by size of fleet.

In addition, there may be costs not easily stated in monetary

terms, such as differences in downtime rates, which are not

included in this example.

^Lower average annual mileage results in a longer replacement

cycle for personal cars.

QA purchase price of $3,000 is assumed.

^Resale value on the pool car, which is replaced annually,

is assumed to be $1,500. (Based on typical patrol car depreciation for a standard size car operated by a medium size city

department, as developed in the full report). For the personal car,

resale value is assumed to be $1,400, or nearly as great as for the pool car, even though personal cars are kept two years

longer. Depreciation for the personal cars was based on rates

typical of a private car, to reflect the fact that they are normally in good condition.

eThis assumes an expenditure of $1,200 to equip each car

and equipment life of 10 years with no salvage value remaining.

^This assumes a cost of 8C per mile for pool cars. The

comparative per mile running cost for personal cars is the

unknown variable in the analysis.

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14
Exhibit 2 Typical Cost Relationships and

Determination of Optimal Replacement Point

NOTE: Optimal Replacement Point does not coincide with the

intersection of depreciation with running expense.

15
(4) Declining performance and reduced reliability are vital factors

replacements if cars depreciate rapidly, are used at low rates,

which do not escalate significantly with increased use.

inor determining

have costs

Thus, a very rough rule is to replace relatively early (perhaps in the first year

of operation) those vehicles which depreciate slowly (i.e., whose resale values are well maintained), are used moderately to heavily, and whose running cost per mile is

rising over time. But for cars which depreciate rapidly, are used at low rates, or whose running cost per mile do not escalate significantly with increased use, costs may

be reduced by keeping them as long as safety and performance criteria permit.

3 . 0 SUMMARY

In summary, the full report defines and investigates alternative approaches to

fleet acquisition, operation, maintenance and disposition. It identifies as pertinent

to life cycle costing the major cost elements shown in Exhibit 3. It attempts to

calculate and compare the costs associated with alternative decisions where possible.

The composition of costs over the life of a typical patrol car as indicated by

the study are depicted in Exhibit 4. The present value of the life cycle costs of a typical patrol car kept for two years is estimated to be close to $7000 in direct

costs and more than $7500 in total costs.

The great variability among departments makes it inadvisable to think in terms

of uniform fleet management rules; individual departments should base management

decisions on their specific cost experience. Nevertheless, some of the findings

of the study are expressable as general guidelines which may be useful for development

of policy within individual departments. These findings are summarized here. Interested

readers are directed to the full report for analyses, data and explanation of procedures.

16
Exhibit 3 Critical Cost Elements to be Considered in a Life Cycle Cost

Analysis of Police Patrol Cars

F irst or Acquisition Costs:

1. Preparation of specifications, testing, and other

procurement-related costs.

2. Purchase price of the vehicle, including delivery

costs and factory accessories.

3. Add-on equipment cost.

4. Equipping/modification labor cost.

5. Lease or purchase cost of tools, equipment, and

facilities which may have to be used in connection

with the vehicle acquisition.

Operation Costs:

6. Gas, oil, and tires.

7. Preventive maintenance program - parts and labor.

8. Other repairs - parts and labor.

9. Accident costs not covered by insurance.

10. Cost of maintaining spare-parts inventory.

11. Incidental expenses (parking, storage, washing).

12. Insurance (net of recovery).

13. Down-time costs -- scheduled and unscheduled.

14. Other shop and administrative overhead.

End Costs :

15. Final reconditioning cost.

16. Selling expenses.

17. Resale or salvage value of the vehicle (a negative

cost)

.

(OR, alternatively, monthly lease payments plus other

applicable costs (e.g., items 1,3,4,6,9,11,13 and 15)
Exhibit 4 Composition of Patrol Car Costs 3

, Direct

Cost Only
yaS-UXA (REV. 7-73)

U.S. DEPT. OF COMM. BIBLIOGRAPHIC DATA

SHEET

1. PUBLICATION OR [IK PORT NO. NBSIR 74-471

2. Gov't Accession

No.

3. Recipient's Accession No.

4. TITLE AND SUBTITLE

Life Cycle Costing of Police Patrol Cars: Summary Report

5. Publication Date 4/4/74

6. Performing Organization Code

7. AUTHOR(S) 8. Performing Organ. Report No. NBSIR 74-471

9. PERFORMING ORGANIZATION NAME AND ADDRESS

NATIONAL BUREAU OF STANDARDS

DEPARTMENT OF COMMERCE

WASHINGTON, D.C. 20234

10. Project/Task/Work Unit No. 4314444

11. Contract/Grant No.

12. Sponsoring Organization Name and Complete Address (Street,- City, State, ZIP)

Law Enforcement Standards Laboratory, National Bureau of

Standards for the National Institute of Law Enforcement, LEAA

Department of Justice

13. Type of Report & Period Covered

Fmal

14. Sponsoring Agency Code

15. SUPPLEMENTARY NOTES

16. ABSTRACT (A 200-word or less (actual summary of most significant information. If document includes a significant

bibliography or literature survey, mention it here.) There are many different choices to be made with respect to police vehicle acquisition,

utilization, maintenance, and disposition. Cost comparisons among the different

alternatives are an important element in the choices to be made. To make valid cost

comparisons, it is necessary to employ the techniques of life-cycle costing. This means the inclusion of all relevant costs and the conversion of costs to an equivalent

basis to take into account differences in the timing of expenditures.

This report briefly summarizes the results of a larger study which compares the life

cycle costs of some of the alternatives associated with police fleet management. The

full report from which this report is derived is entitled Life Cycle Costing: Efficiency

in Vehicle Acquisition, Operation, and Disposition . The focus of the study is on police patrol cars, but the methods are applicable to

other types of vehicles. Specific topics addressed by the larger study and summarized

here are the cost effects of purchasing different sizes of patrol cars and different

optional equipment, the advantages and disadvantages of direct ownership of vehicles as compared with leasing, the costs of contracting out maintenance as compared with

self-maintenance of vehicles, the cost effects of alternative utilization practices,

the optimal timing of vehicle replacement, and the comparative efficiency of different

methods of vehicle disposition.

17. KEY WORDS (six to twelve entries; alphabetical order; capitalize only the first letter of the first key word unless a proper name; separated by semicolons)

Fleet management; life cycle costing; patrol cars; police fleets; vehicle leasing;

vehicle management.

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